What is Investment?

Investment
by Benjamin Graham: the father of value investing 

Investment is simply a term where your money is working for you and provides a good return. Benjamin Graham the father of value investing says, the following definition of investment operation:

"An investment operation is one which upon thorough analysis promises safety of principal and an adequate return". 

Investment operation according to Benjamin Graham consists equally of three elements:

• Thorough Analysis means - "The study of the facts in the light of established standards of safety and value". Identify a company and the soundness of its business before you buy its stock. 

• Safety of principal - Signifies "Protection against loss under all normal or reasonably likely conditions or variations." Deliberately protect yourself from serious losses. 

• Adequate Return - refers to "Any rate or amount of return however how low which the investor is willing to accept, provided he acts with reasonable intelligence".Adequate not extraordinary performance. 

Graham says:

• You invest only if you would be comfortable owning a stock even if you could not know its daily share price. 
• Investing is a unique kind of casino where you can not lose in the end so long as you play only by the rules that put the odds squarely in your favor. 
• People who invest make money for themselves. People who speculate make money for their brokers. 
• The future of security prices is never predictable. You can not predict the behavior of the markets you must learn how to predict and control your own behavior.
• The future value of every investment is a function of its present value. The higher the price you pay the lower your return will be.
• Investing is in not about beating others at their game. It’s about controlling yourself in your own game. 

What is the meaning of Intelligent vs Speculative as per Benjamin Graham?

It simply means being patient, disciplined, and eager to earn. You must also be able to harness your emotions and think for yourself. There's proof that a high IQ and higher education are not enough to make an investor intelligent.

An investment operation follows graham's definitions Thorough analysis, Safety of principle, and Adequate return. Operations not meet these requirements are speculative. 

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on Investment or recommend buying and selling any stock